Goldman Fined over Information Leaks

PUBLISHED: 13 Apr 2012 @ 23:20 | Comments (0) | More info about Lou Gutheil

Goldman Sachs (NYSE:GS) , the controversial New York based investment bank, has been fined $22 million by the U.S. Securities and Exchange Commission (SEC) for reportedly tipping off top clients about stocks.

The SEC alleges that between 2006 and 2011, information from weekly equity research meetings between the firm’s analysts and traders was leaked to some of its clients.

“Goldman failed to implement policies and procedures that adequately controlled the risk that research analysts could preview upcoming rating changes with select traders and clients,” said Robert Khuzami, the SEC’s director of enforcement.

The firm will pay $11 million to both the SEC and the Financial Industry Regulatory Authority (FINRA), a private self-regulatory organization.

While Goldman is being fined for trading improprieties, they are not being fined for insider trading.

Goldman’s internal policies called for required wide distribution of its analysts’ statements regarding stocks that it covered, but it did not apply to certain internal messages regarding “market color and short-term trading issues” that the firm failed to adequately define.

The news comes nearly a month after Greg Smith, a former London-based executive director at the firm, published an editorial in the New York Times bashing the firm’s practices and culture.

In July of 2010, Goldman was fined $550 million (the largest fine ever levied on a bank) by the SEC after the regulator concluded that the firm misled its clients with regard to toxic mortgage-backed assets.

Following that investigation, the FSA fined the bank £17.5 million for failing to notify the regulator that it was being investigated by the SEC.

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